Over the past 50 years, thanks to the unique funding of the BBC and high
levels of commercial investment, British viewers have enjoyed some of the
best produced television in the world.

Don't let anyone tell you that the golden age of television is ancient history, though. Just take a look at the winter schedules on ITV1 and BBC1 – Lynda La Plante's Above Suspicion, Wuthering Heights, An Englishman in New York, The X Factor, Lark Rise to Candleford, Little Dorrit, Wallander. What all these programmes have in common is huge investment. A high-end 9 o'clock drama on ITV1 costs us about £1 million an hour to produce and broadcast. The big entertainment formats cost well over £500,000 an hour. Quality television is a big – and expensive – business.

Britain's unique broadcasting ecology – the BBC licence fee, advertising pounds – has underpinned substantial investment in original production. But the commercial sector is under strain, facing the combined challenge of increased channel choice, digital penetration and outdated regulation. This is undermining its ability to continue investing in quality programming. And that's before you factor in the worst economic downturn that the industry has faced.

Any business must adapt to changing market dynamics. But our freedom to do so is hamstrung by a system of licensing, which Ofcom itself describes as "broken". Next week sees the publication of the regulator's proposals on how to safeguard our public service broadcasting tradition in a digital age. Change cannot come soon enough.

Historically, the regulation of ITV was the price paid for the right to enjoy the commercial monopoly of airtime. It came in the form of conditions on output, unashamedly an instrument of social and industrial policy. But too many of those expectations survived long after the disappearance of the monopoly profits that supported them.

To make matters worse, new competition has done very little for investment. There was early optimism that it would produce a "bookshop of the air", with consumers enjoying the benefits of hugely extended choice of quality output. The reality has been quite different.

Ofcom's figures show that the public service broadcasters – BBC, ITV, C4 and Five – still account for over 90 per cent of investment in new television content. It concludes that this is "unlikely to change". And so ITV continues with high levels of creative investment, while competing with newcomers who erode its income but put little back into new programmes.

We are doing everything we can to meet the challenge, slashing non-programme costs and improving operational performance. But we need to maintain our £1 billion investment in programmes. Meanwhile, we're struggling with licence obligations rooted in that bygone age of the ITV monopoly. For some time, the gap between the costs and benefits of the public service licences has been narrowing. By the end of this year, the costs of the licences will outweigh the benefits. By 2014 the gap will grow to over £100 million.

There is a solution. It's a simple deal which will allow ITV to sustain its regional news services until at least 2016 – in partnership with the BBC – in return for the removal of the remaining residue of legacy regulation.

Approaches to share news resources with ITV were made by the BBC as part of their recently announced Partnerships Proposals. We hope to announce an outline agreement shortly. ITV and the BBC would share facilities, buildings and technology across the UK – making commercially funded regional news much more cost efficient. But they would still produce separate, competitive news services.

For their part, the regulators and Government must remove the remaining regulatory burdens. This would include scrapping the quotas on where programmes are made and who produces them. It would mean the abolition of ITV's licence payments. It would see the end of the odd situation in which ITV subsidises commercial television in Scotland and Ulster. And it would reform the regulatory regime that directs the way in which we sell our own advertising space.

This would allow ITV to operate with greater commercial freedom and efficiency, while providing robust competition to the BBC in national, international and regional broadcast news. It would help support investment in programming for the rest of the licence period. But it would still leave ITV in a curious twilight zone, obliged to meet public service regulations, while striving to meet the demands of viewers, advertisers and shareholders.

There is another option. ITV could give up its public service licences and operate as a purely commercial entity, with no commitment to news or original production. That is not without risk and is not our preferred option.

It is clear, though, that without radical action, we're heading towards a situation where commercial investment in original programming in the UK becomes unsustainable, leaving the BBC as the sole provider of quality, British programming. And that can only be bad news for viewers.